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Bad Credit Car Loan Rates on Average – What are They?

More and more people are being approved for car loans no matter their credit score. Unfortunately, that is not because of the mere good-will or kind hearts of lenders, but because there is more profit to be made by charging higher interest rates for these loans.

Bad credit is usually considered to be any score under 620. Sub-prime credit extends between 620 and 659 for most lenders. Either score category will cause you have to pay a higher interest rate than a person whose credit falls in the good, prime, or super-prime (excellent) ratings.

Auto Loan Rates for Sub-prime and Deep Sub-prime Borrowers

Sub-prime borrowers will most likely have to pay four to six points above the prime interest rate. Today, the prime rate for a new car loan is 1.99 percent, so a sub-prime borrower may have to pay as high as 7.99 percent for the same loan. A person with a credit score between 560 and 619 may have to pay as much as 14 percent for that loan, while a person whose score is under 559 could face an interest rate that is as high as 20 percent.

Loan Lengths for People with Bad Credit

Another issue to be aware of is the shorter loan lengths associated with a low credit score. In general, the lower your credit score is, the shorter the length of your loan will be. If a person with prime credit can get a new car loan for 72 months, the same loan to someone with sub-prime credit may only last 48-60 months, and a person with bad credit may have to repay the same loan within 36 months. Shorter financing terms result in less total interest paid; however, they mean higher monthly payments.

Address Your Credit Issues, Lower Your Rates

The best thing you can do is to get a copy of your credit report at With it in hand, start correcting any errors or omissions that you may find. If there are collection accounts on your report, try to pay them off. If you have credit card debt, pay it down. If your credit card balances are in excess of thirty percent of your available credit limits, then your credit score is suffering. Lastly, try to build a higher down payment before you shop for a car. A higher down payment may make your loan more enticing to a lender.

With bad credit, your chances of being approved for a car loan improve by shopping your loan around. Where a traditional bank may say no, a credit union, finance company, or online lender is apt to say yes.

About the Author

The author has many years of experience in automotive finance and insurance. However, each consumer's situation is unique. It is best to contact a finance specialist for further assistance.
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